It is very important in marketing to distinguish between the customer and the consumer. The customerThe person or the business that actually buys a product or a service., the person or the business that actually buys a product or a service, will determine whether a business succeeds or fails. It is that simple. It does not matter one iota if a business thinks its product or service is the greatest thing since sliced bread if no one wants to buy it. This is why customers play such a central role in marketing, with everything revolving around their needs, wants, and desires. We see the customer focus in the marketing concept, and we see it in the marketing mix.
Figure 6.3 The Customer and the Marketing Mix
The marketing mix should follow the determination of customer needs, wants, and desires. However, there are instances in which a product is created before the target market is selected and before the rest of the marketing mix is designed. One well-known example is Ivory Soap. This product was created by accident. Air was allowed to work its way into the white soap mixture that was being cooked. The result was Ivory Soap, a new and extraordinarily successful product for Procter & Gamble.“History of Ivory Soap,” Essortment.com, accessed December 1, 2011, www.essortment.com/history-ivory-soap-21051.html. Most companies do not have this kind of luck, though, so a more deliberate approach to understanding the customer is critical to designing the right marketing mix.
The consumerThe person or the company that uses or consumes a product. is the person or the company that uses or consumes a product. For example, the customer of a dry cleaning service is the person who drops off clothes, picks them up, and pays for the service. The consumer is the person who wears the clothes. Another example is a food service that caters business events. The person who orders lunch on behalf of the company is the customer. The people who eat the lunch are the consumers. The person who selects the catering service could be either or both. It is common for the customer and the consumer to be the same person, but this should not be assumed for all instances. The challenge is deciding whether to market to the customer or the consumer—or perhaps both.
There are two major types of customer markets: business-to-business (B2B)Organizations such as corporations; small businesses; government agencies; wholesalers; retailers; and nonprofit organizations, such as hospitals, universities, and museums. customers and individual consumers or end users (business-to-consumer [B2C])People who buy for themselves, their households, friends, coworkers, or for other non-business-related purposes.. B2B customers are organizations such as corporations; small businesses; government agencies; wholesalers; retailers; and nonprofit organizations, such as hospitals, universities, and museums. In terms of dollar volume, the B2B market is where the action is. More dollars and products change hands in sales to business buyers than to individual consumers or end users.Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 182. The B2B market offers many opportunities for the small business. Examples of B2B products include office supplies and furniture, machinery, ingredients for food preparation, telephone and cell phone service, and delivery services such as FedEx or UPS.
The B2C market consists of people who buy for themselves, their households, friends, coworkers, or other non-business-related purposes. Examples of B2C products include cars, houses, clothing, food, telephone and cell phone service, cable television service, and medical services. Opportunities in this market are plentiful for small businesses. A walk down Main Street and a visit to the Internet are testaments to this fact.
The better a small business understands its customers, the better off it will be. It is not easy, and it takes time, but knowing who the customers are, where they come from, what they like and dislike, and what makes them tick will be of immeasurable value in designing a successful marketing mix. Being intuitive can and does work…but not for everyone and not all the time. A more systematic and thorough approach to understanding the customer makes much more sense. The problem is that many if not most small businesses probably do not take the time to do what it takes to understand their customers. This is an important part of the reason why so many small businesses fail.
Consumer Behavior Matters(click to see video)
Understanding a customer’s behavior will increase sales.
Consumer behaviorHow individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants.—“how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants”Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 182.—is the result of a complex interplay of factors, none of which a small business can control. These factors can be grouped into four categories: personal factorsAge, gender, race, ethnicity, occupation, income, and life-cycle stage., social factorsCulture, subculture, social class, family, and reference groups., psychological or individual factorsMotivation, perception, learning, attitudes, personality, and self-concept., and situational factorsThe reason for purchase, the time we have available to shop and buy, our mood, and the shopping environment.. It is important that small-business owners and managers learn what these factors are.
These factors all work together to influence a five-stage buying-decision process (Table 6.2 "Five Stages of the Consumer Buying Process"), the specific workings of which are unique to each individual. This is a generalized process. Not all consumers will go through each stage for every purchase, and some stages may take more time and effort than others depending on the type of purchase decision that is involved.Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 112. Knowing and understanding the consumer decision process provides a small business with better tools for designing and implementing its marketing mix.
Table 6.2 Five Stages of the Consumer Buying Process
|1.||Problem recognition||Buyer recognizes a problem or need.||Joanne’s laptop just crashed, but she thinks it can be fixed. She needs it quickly.|
|2.||Information search||Buyer searches for extensive or limited information depending on the requirements of the situation. The sources may be personal (e.g., family or friends), commercial (e.g., advertising or websites), public (e.g., mass media or consumer rating organizations), or experiential (e.g., handling or examining the product).||Joanne is very knowledgeable about computers, but she cannot fix them. She needs to find out about the computer repair options in her area. She asks friends for recommendations, checks out the yellow pages, does a Google search, draws on her own experience, and asks her husband.|
|3.||Evaluation of alternatives||Buyer compares different brands, services, and retailers. There is no universal process that everyone uses.||Joanne knows that computer repair services are available at the nearby Circuit Place and Computer City stores. Unfortunately, she has had bad experiences at both. Her husband, David, recently took his laptop to a small computer repair shop in town that has been in business for less than a year. He was very pleased. Joanne checks out their website and is impressed by the very positive reviews. None of her friends could recommend anyone.|
|4.||Purchase decision||Buyer makes a choice.||Joanne decides to take her computer to the small repair shop in town.|
|5.||Postpurchase behavior||How the buyer feels about the purchase and what he or she does or does not do after the purchase.||Joanne’s laptop was fixed quickly, and the cost was very reasonable. She feels very good about the experience, so she posts a glowing review on the company’s website, recommends the shop to everyone she knows, and plans to go back should the need arise. Had she been unhappy with her experience, she would have posted a negative review on the company’s website, told everyone she knows not to go there, and refuse to go there again. It is this latter scenario that should be every small business’s nightmare.|
Source: Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 168; Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 112–17.
California’s Bargain Wine Boom
Consumers are shifting to less expensive wines from small winemakers.
Understanding how businesses make their purchasing decisions is critical to small businesses that market to the business sector. Purchases by a business are more complicated than purchases by someone making a personal purchase (B2C). B2B purchases vary according to dollar amount, the people involved in the decision process, and the amount of time needed to make the decision,Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 137. and they involve “a much more complex web of interactions between prospects and vendors in which the actual transaction represents only a small part of the entire purchase process.”Bill Furlong, “How the Internet Is Transforming B2B Marketing,” BrandNewBusinesses.com, accessed December 1, 2011, www.brandnewbusinesses.com/NewsletterAugust2008A1.aspx.
The individual or the group that makes the B2B buying decisions is referred to as the buying centerIndividuals and groups who participate in the purchasing decision-making process and who share some common goals and the risks arising from the decision.. The buying center consists of “all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decision.”Frederick E. Webster Jr. and Yoram Wind, Organizational Buying Behavior (Upper Saddle River, NJ: Prentice-Hall, 1972), 2, as cited in Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 188. The buying center in a small business could be as small as one person versus the twenty or more people in the buying center of a large corporation. Regardless of the size of the buying center, however, there are seven distinct roles: initiator, gatekeeper, user, purchaser or buyer, decider, approver, and influencer.Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 188; Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 139. One person could play multiple roles, there could be multiple people in a single role, and the roles could change over time and across different purchase situations.
Figure 6.4 The B2B Buying Process
Source: Adapted from Dana-Nicoleta Lascu and Kenneth E. Clow, Essentials of Marketing (Mason, OH: Atomic Dog Publishing, 2007), 148–55.
The B2B purchasing process for any small business will be some variation of the process described in Figure 6.4 "The B2B Buying Process". The specifics of the process will depend on the nature of product, the simplicity of the decision to be made, and the number of people involved. Clearly the purchasing process for a single-person business will be much simpler than for a multiproduct business of 400 employees.
Customer experience is one of the great frontiers for innovation.Jeneanne Rae, “The Importance of Great Customer Experiences…And the Best Ways to Deliver Them,” Bloomberg BusinessWeek, November 27, 2006, accessed December 1, 2011, www.BusinessWeek.com/magazine/content/06_48/b4011429.htm?chan =search.
Customer experienceA customer’s entire interaction with a company or an organization. refers to a customer’s entire interaction with a company or an organization. The experience will range from positive to negative, and it begins when any potential customer has contact with any aspect of a business’s persona—the company’s marketing, all representations of the total brand, and what others say about the experience of working with the business.Fran ONeal, “‘Customer Experience’ for Small Business: When Does It Start?,” Small Business Growing, August 23, 2010, accessed December 1, 2011, smallbusinessgrowing.com/2010/08/23/what-is-the-customer-experience-for-small -business.
Customers will experience multiple touch pointsAll the communication, human, and physical interactions that customers experience during their relationship life cycle with a small business. (i.e., all the communication, human, and physical interactions that customers experience during their relationship life cycle with a small business)Eric Brown, “Engage Emotion and Shape the Customer Experience,” Small Business Answers, December 14, 2010, accessed December 1, 2011, www.smallbusinessanswers.com/eric-brown/engage-emotion-and-shape-the -customer-ex.php. during their visit. In a retail situation, a customer will experience the store design and layout; the merchandise that is carried and how it is displayed; the colors, sounds, and scents in the store; the cleanliness of the store; the lighting; the music; the helpfulness of the staff; and the prices. In a business situation, a customer will experience the design and layout of the reception and office areas, the colors chosen for carpeting and furniture, the friendliness and helpfulness of the reception staff, and the demeanor of the person or people to be seen. The experience also occurs when a customer communicates with a company via telephone; e-mail; the company website; and Facebook, Twitter, or other social media.
Store design plays a very important role in a customer’s experience. Check out the following three examples of small business store redesigns that have contributed to increased profitability:
Fine Wine & Good Spirits, Philadelphia
The Diamond Cellar, Dublin, Ohio
Roche Bros. Supermarkets
Good customer experiences “from the perspective of the customer…are useful (deliver value), usable (make it easy to find and engage with the value), and enjoyable (emotionally engaging so that people want to use them).”Harley Manning, “Customer Experience Defined,” Forrester’s Blogs, November 23, 2010, accessed December 1, 2011, blogs.forrester.com/harley_manning ?page=1&10-11-23-customer_experience_defined=. A customer experience can be a one-time occurrence with a particular company, but experiences are more likely to happen across many time frames.Harley Manning, “Customer Experience Defined,” Forrester’s Blogs, November 23, 2010, accessed December 1, 2011, blogs.forrester.com/harley_manning ?page=1&10-11-23-customer_experience_defined=. The experience begins at the point of need awareness and ends at need extinction.Lynn Hunsaker, Innovating Superior Customer Experience (Sunnyvale, CA: ClearAction, 2009), e-book, accessed December 1, 2011, www.clearaction.biz/innovation.
Exploring Consumer Behavior Online and Offline
Consumers are willing to pay more for products they can touch. “Touching” is an important part of the customer experience.
B2C customer experiences also involve emotional connections. When small businesses make emotional connections with customers and prospects, there is a much greater chance to forge bonds that will lead to repeat and referral business. When a business does not make those emotional connections, a customer may go elsewhere or may work with the business for the moment—but never come back and not refer other customers or clients to the business.“Grow Customers and Referrals!” Small Business Growing, accessed December 1, 2011, smallbusinessgrowing.com/grow-customers-and-referrals.
Many businesses may not appreciate that 50 percent of a customer’s experience is about how a customer feels. Emotions can drive or destroy value.Colin Shaw, “Engage Your Customers Emotionally to Create Advocates,” CustomerThink, September 17, 2007, accessed December 1, 2011, www.customerthink.com/article/engage_your_customers_emotionally. “Customers will gladly pay more for an experience that is not only functional but emotionally rewarding. Companies skilled at unlocking emotional issues and building products and services around them can widen their profit margins…Great customer experiences are full of surprising ‘wow’ moments.”Jeneanne Rae, “The Importance of Great Customer Experiences…And the Best Ways to Deliver Them,” Bloomberg BusinessWeek, November 27, 2006, accessed December 1, 2011, www.BusinessWeek.com/magazine/content/06_48/b4011429.htm?chan =search.
Small businesses should learn and think about how to market a great B2C customer experience, not just a product or a service.Shaun Smith, “When Is a Store Not a Store—The Next Stage of the Retail Customer Experience,” shaunsmith+co Ltd, March 29, 2010, accessed December 1, 2011, www.smithcoconsultancy.com/2010/03/when-is-a-store-not-a-store-%E2%80%93 -the-next-stage-of-the-retail-customer-experience. Design an experience that is emotionally engaging by mapping the customer’s journeyColin Shaw, “Engage Your Customers Emotionally to Create Advocates,” CustomerThink, September 17, 2007, accessed December 1, 2011, www.customerthink.com/article/engage_your_customers_emotionally.—and then think of ways to please, perhaps even delight, the customer along that journey. A history of sustained positive customer experiences will increase the chances that a business will be chosen over its competition.Jeneanne Rae, “The Importance of Great Customer Experiences…And the Best Ways to Deliver Them,” Bloomberg BusinessWeek, November 27, 2006, accessed December 1, 2011, www.BusinessWeek.com/magazine/content/06_48/b4011429.htm?chan =search.
Meaningful, memorable, fun, unusual and unexpected experiences influence the way customers perceive you in general and feel about you in particular. These little details are so easy to overlook, so tempting to brush off as unimportant. But add a number of seemingly minor details together, and you end up with something of far more value than you would without them.
It’s the little details that keep a customer coming back over and over, it’s the little details that cause a customer to rationalize paying more because she feels she is getting more, it’s the little details that keep people talking about you and recommending everyone they know to you.
Anyone can do the big things right; it’s the little things that differentiate one business from another and that influence customers to choose one over the other. Often, small-business owners cut out the little details when times get tough, and this is a big mistake.Sydney Barrows, “6 Ways to Create a Memorable Customer Experience,” Entrepreneur, May 19, 2010, accessed December 1, 2011, www.entrepreneur.com/article/206760.
There is, however, no one-size-fits-all design for customer experience in the B2C market. Small businesses vary in terms of the size, industry, and nature of the business, so customer experience planning and design will necessarily differ in accordance with these factors. The customer experience for a 1-person business will be very different from an experience with a 400-employee company.
How to Hire the Right Customer Service Person For Your Small Business(click to see video)
Talk to customer experience executives in a B2B environment about emotional engagement and you will see their eyes roll. Ask them if they would consider designing retail stores with customized smell and music to reinforce the customer experience and you will most likely be ushered out of their offices. Mention the iPod or MySpace experience and you will likely face a torrent of sighs and frowns.Lior Arussy, “Creating Customer Experience in B2B Relationships: Managing ‘Multiple Customers’ Is the Key,” G-CEM, accessed December 28, 2011, www.g-cem.org/eng/content_details.jsp?contentid=2203&subjectid=107.
Creating customer relationships in the B2B environment is radically different from the B2C environment because customers face different challenges, resources, and suppliers.Lior Arussy, “Creating Customer Experience in B2B Relationships: Managing ‘Multiple Customers’ Is the Key,” G-CEM, accessed December 28, 2011, www.g-cem.org/eng/content_details.jsp?contentid=2203&subjectid=107. In the B2B world, there will almost always be “multiple people across multiple functions who play major roles in evaluating, selecting, managing, paying for and using the products and services their company buys…So, unlike the B2C company, if you are a B2B supplier there will be a host of individual ‘customers’ in engineering, purchasing, quality, manufacturing, etc. with different needs and expectations whose individual experiences you must address to make any given sale.”Richard Tait, “What’s Different about the B2B Customer Experience,” Winning Customer Experiences, August 16, 2010, accessed December 1, 2011, winningcustomerexperiences.wordpress.com/2010/08/16/whats-different-about -the-b2b-customer-experience. This is offset, however, by the fact that a B2B company probably has a substantially smaller number of potential customers in a given target market, so it is often possible to actually get to know them personally. Smart B2B firms can tailor their products or services specifically to deliver the experiences wanted by people they know directly.Richard Tait, “What’s Different about the B2B Customer Experience,” Winning Customer Experiences, August 16, 2010, accessed December 1, 2011, winningcustomerexperiences.wordpress.com/2010/08/16/whats-different-about -the-b2b-customer-experience.
How Customer Experience Applies in the B2B Sector(click to see video)
Customer experience concerns are relevant in the B2B environment.
Despite the challenges, customer experience is relevant in the B2B environment. However, because “the buy decision-making processes in most companies are typically fully structured and quantitative criteria-based…the explicitly emotional experience laden sales pitch that drives consumer buying is not a fit in the B2B world.”Richard Tait, “What’s Different about the B2B Customer Experience,” Winning Customer Experiences, August 16, 2010, accessed December 1, 2011, winningcustomerexperiences.wordpress.com/2010/08/16/whats-different-about -the-b2b-customer-experience. The products that often represent B2B business’s sole value proposition are rarely emotionally engaging or visually appealing. Think bolts, wires, copy paper, shredding machines, bread for a restaurant, and machinery. How engaging can these items be?
There are touch points in B2B processesAdapted from Pawan Singh, “The 9 Drivers of B2B Customer Centricity,” Destination CRM.com, December 11, 2010, accessed December 1, 2011, www.destinationcrm.com/Articles/Web-Exclusives/Viewpoints/The-9-Drivers-of -B2B-Customer-Centricity-72672.aspx. before and after the sale (e.g., information gathering, website visits and inquiries, delivery of spare parts, service calls on machinery and office equipment, and telephone interactions) that can be identified and improved. However, the inherent differences between B2B and B2C environments must be clearly understood so that the B2C customer experience models do not become the paradigm for B2B customer experience designs. As is the case in the B2C market, there is no universal approach to customer experience in the B2B market. Small B2B companies also vary in terms of the products and the services offered and the size, industry, and nature of the business, so customer experience planning and design will necessarily differ in accordance with these factors.
The greatest challenge in delighting B2B customers is adding unique and differentiating value that solves customer problems. When defining the customer experience, recognize that this value should extend to the entire customer and business life cycle—presale engagement, the sales process, and postsale interactions. Experiences at every stage of the customer life cycle should be customized to each individual customer.Lior Arussy, “Creating Customer Experience in B2B Relationships: Managing ‘Multiple Customers’ Is the Key,” G-CEM, accessed December 28, 2011, www.g-cem.org/eng/content_details.jsp?contentid=2203&subjectid=107.
Customer Experience Differentiation
Customer experience in the B2C and B2B environments.
Customer loyaltyAttracting the right customers, getting them to buy, buy often, buy in higher quantities, and bring the business even more customers. is “all about attracting the right customers, getting them to buy, buy often, buy in higher quantities and bring [the business] even more customers.”“What Is Customer Loyalty?,” Customer Loyalty Institute, accessed December 1, 2011, www.customerloyalty.org/what-is-customer-loyalty. It involves an emotional commitment to a brand or a business (“We love doing business with your company.”), an attitude component (“I feel better about this brand or this business.”), and a behavior component (“I’ll keep buying this brand or patronizing that business, regardless.”). Attitudes are important because repeat purchases alone do not always mean that a customer is emotionally invested.Adapted from “Why Measure—What Is Loyalty?,” Mindshare Technologies, accessed December 1, 2011, www.mshare.net/why/what-is-loyalty.html. Think about the thrill of buying car insurance. We may keep buying from the same company, but we rarely have an emotional commitment to that company. Emotional commitment is key in customer loyalty.
The benefits of loyal customers are numerous:Adapted from Rama Ramaswami, “Eight Reasons to Keep Your Customers Loyal,” Multichannel Merchant, January 12, 2005, accessed December 1, 2011, multichannelmerchant.com/opsandfulfillment/advisor/Brandi-custloyal/.
Customer loyalty begins with the customer experience and is built over time through the collection of positive experiences.Jeffrey Gangemi, “Customer Loyalty: Dos and Don’ts,” BusinessWeek, June 29, 2010, accessed December 1, 2011, www.BusinessWeek.com/smallbiz/tipsheet/06/29.htm. This will be true no matter the size, industry, and nature of the small business. Customers’ experiences will influence how much they will buy, whether they switch to a competitor, and whether they will recommend the brand or the business to someone else.Bruce Temkin, “The Four Customer Experience Core Competencies,” Temkin Group, June 2010, accessed December 1, 2011, experiencematters.files.wordpress.com/2010/06/1006_thefourcustomerexperiencecorecompetencies_v2.pdf. Small businesses cannot rely on the loyalty that comes from convenience (e.g., using the car dealer close to home for repairs instead of the one farther away that provides better service). Loyalty is about making a customer feel special. This is the dream of all small businesses—which is something that small businesses are particularly well suited to create. Because of their size, it is easier for small businesses to have closer relationships with their customers, create a more personal shopping environment, and, in general, create great customer experiences. Think back to Bob Brown of the Cheshire Package Store (Chapter 2 "Your Business Idea: The Quest for Value"). He prides himself on the kind of shopping environment and customer relationships that lead to loyalty.
How do people make choices about which pharmacy to go to? Paul Gauvreau decided to find out by asking customers why they were shopping in one particular store.
Paul concluded that this pharmacy succeeded in differentiating itself from the competition in a unique way: by how they made their customers feel—and this is what will generate the most intimate loyalty in a customer.Paul Gauvreau, “Making Customers Feel Special Brings Loyalty,” Pharmacy Post 11, no. 10 (2003): 40.
Listening to Customers Leads to Loyalty
All customers really want is for the companies they do business with to listen to them.
Is There a Right Kind of Customer Loyalty?
Behavioral, emotional, and profitable customer loyalty. What they are, and what companies can do to create and improve them.
Small businesses that are operating in the B2B sector might wonder whether there are major differences between B2B and B2C models of customer loyalty. Michael Lowenstein, vice president and senior consultant in customer loyalty management at Harris Interactive says that “except for the specific supplier decision criteria, which varies from situation to situation, there is [sic] more similarities than differences between B2C and B2B in what drives customer loyalty behavior.”Michael Lowenstein, “Customer Loyalty Behavior in B2B vs. B2C Scenarios,” SearchCRM, January 31, 2007, accessed December 1, 2011, searchcrm.techtarget.com/answer/Customer-loyalty-behavior-in-B2B-vs-B2C -scenarios. What can be concluded in either case is that achieving and retaining loyal customers should be an important goal for any company—small or large.